Employers Turn to Biometric Technology to Track Attendance

When hourly employees arrive at Greathouse Screen Printing in San Diego, instead of punching a time clock they smile into a biometric facial recognition device that sits on a counter at the front of the shop. In a matter of seconds, the device identifies them, automatically punches them in, and sends the data to a cloud-based time-and-attendance software program.

The company's owner, Shawn Greathouse, implemented the biometric clock from Processing Point Inc. a year ago to streamline his time-management process and to ensure that he was only paying employees for the hours they worked.

"Buddy punching was definitely part of the decision," Greathouse says. "It was never an out-of-hand problem, but it did happen."

Buddy punching—the practice of punching another employee in or out when they aren't there—is one of many forms of time theft.

A 2009 study conducted by Harris Interactive Inc. showed that 21 percent of hourly employees admit to stealing company time. While only 5 percent participated in buddy punching, 69 percent said they punch in and out earlier or later than scheduled, 22 percent put additional time on their time sheet, and 14 percent didn't punch out for unpaid lunches or breaks.

"It's all a form of fraud," says Lisa Disselkamp, director at Deloitte Consulting and co-founder of the Workforce Educational Organization, a nonprofit time and labor management research firm in Richmond, Virginia. "When employees inflate their time, it directly impacts the bottom line."

Many employers are implementing biometric time clocks to make it harder for hourly workers to steal company time. Whether the device uses facial recognition, fingerprint tracking or vein-pattern scanning, these clocks can eliminate time theft by verifying the identity of those clocking in, and creating a digital audit trail so time sheets can't be altered.

"Biometric technology won't tell you if someone punched in then ran back to their car," Disselkamp says. "But it will validate that employees are on the premises when they say they are."

They also make time and attendance data—and payment history—much more defensible. Digital time tracking means employers can prove that they paid employees for the hours they worked and demonstrate to safety auditors that they had the right number and combination of employees on-site at any given time.

Such validation has become increasingly important in recent years as lawsuits involving fair-wage practices have picked up. More than 7,000 wage-and-hour lawsuits were filed in federal court in 2011—up 32 percent from 2008, according to published reports. The primary complaint in these lawsuits was that workers were being forced to put in more than 40 hours a week without overtime pay.

The U.S. Labor Department recovered $225 million in back wages for employees during fiscal 2011. And that number is likely to increase, as the Labor Department's Wage and Hour Division continues to add new investigators to pursue violation complaints.

The best way for employers to fight these lawsuits—assuming they are unfounded—is with data, says Andrew Newby, chief operating officer of ProcessingPoint Inc., a business service provider that offers a line of biometric time clocks. "Many courts side with employees in claims that they were underpaid or not given fair overtime," he says. "But if the employer has records that shows employees were paid for the hours they worked, the case goes from a 'he said, she said' to one based on facts."

Along with tracking all original punches, most biometric software programs will indicate if a punch has been changed along with the original punch time, and may require a manager's note explaining why the change was made, which prevents tampering.

"It's important to have these tracking features for the audit trail," Newby says.

All of these biometric fraud controls were appealing to the leadership team at Yarco Co., a real estate management firm based in Kansas City, Missouri. Yarco has 400 employees managing 100 properties in 10 states, and 375 of them are remote hourly workers.

However, the number of external workers wasn't the only impetus for making the switch to a biometric time management system, says Grant Kaufman, Yarco's director of operations. His team was looking for efficiency.

"We did an HRIS conversion to Ceridian in 2007, and once that was done, we realized we had to get rid of our clunky, old time-and-attendance system," Kaufman says, referring to a human resources information system.

Before the conversion, Yarco relied on hand-written time cards that employees filled out once every two weeks and faxed to their manager. Once approved, the company's two payroll staffmembers would spend the entire weekend deciphering the handwritten faxes and manually entering the time data into the Ceridian system so employees could be paid on time.

"It was brutal," Kaufman says. The faxes were difficult to read, and even when they were legible, they were trusting employees to be completely honest about their hours.

When Kaufman began exploring alternative systems, the Ceridian sales rep connected him with M2Sys Accelerated Biometrics, a technology company in Atlanta. A few months later the company rolled out an M2Sys finger-vein-reader clock at all 100 property sites.

The tool was easy to use. Employees create a template by doing three scans of their finger so the system can record their vein pattern. After that, employees just slide their finger into the reader, and it records the punch in less than 30 seconds.

Despite this ease of use, Kaufman's team went to all 100 sites to conduct training and to talk to employees about what biometric technology is, how it works and how the data would be used.

"We handled it all with kid gloves because we knew some people would be touchy about Big Brother issues," he says.

This is a common concern among employees who fear their data is going to be used against them, says Michael Trader, president of M2Sys. "Invasion of privacy is the biggest obstacle employers face," he says. "But it's important to note that no image is ever stored."

The vein reader—and all biometric time clocks—don't take actual pictures or fingerprints of employees. They scan the identified features and translate them into a numbered code that corresponds with a specific employee ID. Without an associated picture, the scans can't be used to track an individual or steal that person's identity. "It's just an encrypted binary data stream," Trader says.

Kaufman's team also explained the benefits of the clock to the employees—they could be paid sooner, it would eliminate handwriting confusion and data-entry errors, and it meant they no longer had to remember their hours for the biweekly time sheets.

"Once they realized how easy it was to use, we didn't get as much flak as we thought," he says.

And while he's certain the company has reduced the incidence of time theft, the real benefit came from the efficiencies of the new system. Thanks to the automated system, they cut the time it takes to process payroll by 90 percent and were able to cut one full-time payroll staffer. "The savings were unreal."

Educating employees about how biometrics work can go a long way toward easing their fears and getting buy-in for the technology, Greathouse says. "They are going to punch in one way or another," he says. "If you address their concerns about the technology upfront, it won't become a problem."